TCS share price volatile after weak Q1 results; soars 50% since March; should you buy or sell the stock?

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Updated: Jul 10, 2020 10:19 AM

Around 9.45 AM, TCS shares were trading flat with a positive at Rs 2,205.85 apiece, after touching day's high of Rs 2,222. TCS stock price has rallied nearly 48 per cent since March low of Rs 1,504.4 per share.

TCS, tcs share priceThe IT bellwether, Tata Consultancy Services, posted 13.81 per cent on-year fall in profit at Rs 7,008 crore for the first quarter of the FY21

TCS share price fell 1.18 per cent in the opening trade but soon turned positive and gained nearly one per cent on Friday, a day after the company reported a decline in revenues and earnings in the April-June quarter of the current fiscal, on the back of the coronavirus pandemic. The IT bellwether, Tata Consultancy Services, posted 13.81 per cent on-year fall in profit at Rs 7,008 crore for the first quarter of the FY21. The company missed the Street’s estimates on all fronts in the quarter ended June 30. “While the Q1FY21 numbers were below street expectations on all counts, new deal wins remained strong at USD 6.9bn for the quarter which was a key positive. Markets will also look forward to management commentary and their outlook for the rest of the year,” said Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd.

Around 9.45 AM, TCS shares were trading flat with a positive at Rs 2,205.85 apiece, after touching day’s high of Rs 2,222. TCS stock price has rallied nearly 48 per cent since March low of Rs 1,504.4 per share. Earlier this week, TCS shares hit a fresh record high of Rs 2,301.85 apiece on BSE after JP Morgan Funds bought TCS shares worth nearly Rs 247 crore through an open market transaction. Research and brokerage firm Motilal Oswal Financial Services maintains a positive outlook on the stock. “Management believes the worst impact of COVID-19 is behind (both in terms of revenue and profitability) even as some variables such as pricing and working capital cycles warrant a close watch. We expect TCS to be a key beneficiary of the COVID-19-led increase in tech intensity across verticals, it said. The brokerage firm also said that while the peak of COVID-19-led uncertainty may be behind, near-term negative surprises related to demand, pricing, and collections cannot be ruled out. “TCS has a historical track record of adapting to multiple business challenges and technology change cycles,” Motilal Oswal said in a research report.

Research and brokerage firm Philip Capital is upbeat on the stock with 10 per cent upside. “It’s times like these, that clients value the vendor expertise, scale and adaptability more – leading to a highly evident “flight to quality” – which benefits firms like TCS. We continue to believe that if there is one company which can emerge stronger out of this crisis – it will be TCS,” it said. It believes TCS to bounce back strongly in FY22, however, it said that FY21 will remain a washout year for the entire sector.

Motilal Oswal has given a ‘neutral’ rating, while Philip Capital recommended to ‘buy’ the stock. On the other hand, HDFC Securities maintained ‘reduce’ on TCS with a target price of Rs 1,980, a downside of 10 per cent

The board of the company also recommended an interim dividend of Rs 5 per share which shall be paid on July 31 to the equity shareholders.

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